How to Buy a House in North Carolina: A Homebuyer’s Guide

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Edited byMorgan Hull
Edited byMorgan Hull

Updated: October 14, 2023

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Since last year, the typical home value in North Carolina has risen by over 19% to $330K. Still, the average home value in the state is lower than the national average of $357K.

If you're trying to buy a house in North Carolina, it's a good idea to familiarize yourself with the entire homebuying process first. Because purchasing a home involves taking out a mortgage that will take years to repay, it’s important that you feel confident about your decision.

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Choose an Ideal Location

The purchase price of your home in North Carolina will vary based on where it’s located. Typically, homes located in suburban areas are less expensive than those in metropolitan cities. Prices may also be impacted by neighborhood amenities, transportation and other comparable aspects.

For example, the typical price of a home in Raleigh is around $448K. This is considerably more than the median home price in Broadway, which is $239K. While suburban areas may be the cheapest places to buy a house in North Carolina, they may not be the least expensive place to live.

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WORK WITH A REAL ESTATE AGENT

To aid in the home buying process, you should consider hiring a real estate agent. Their expert knowledge of local market conditions and property will help you locate the best available property and purchase your home seamlessly.

Finding the best real estate agent, though, may be challenging. MoneyGeek recommends the following tips when looking for a real estate agent:

  • Obtain referrals from family, friends and colleagues.
  • Verify the agent’s licensing and experience
  • Obtain customer feedback
  • Ask the agent about their familiarity with the neighborhood
  • Compare prices to get the more affordable rates
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CALCULATE THE COST OF LIVING

Although the average cost of living in North Carolina is lower than the national average, certain cities and areas may be more expensive. For example, you will spend 10% more of your income on essentials (housing, food, etc.) in Asheville than in Durham.

Purchasing a home in an area that has a lower cost of living will save you money in the long run. To calculate the average cost of living in your chosen city, you should take into account expenses for the following items:

  • Food
  • Utilities
  • Healthcare
  • Transportation
  • Education
  • Entertainment

Using MoneyGeek's cost of living calculator, you can determine the appropriate income for a number of North Carolina cities.

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CONSIDER AFFORDABLE NEIGHBORHOODS

The cost of living in North Carolina is among the lowest in the country. If you are considering buying a house in the state, you can reduce your expenses by buying a home in an area with a low cost of living.

Typically, living in the suburbs is less expensive than living in the city. However, if you choose to live in a non-metropolitan area, you may have to sacrifice access to hospitals, workplaces and other social services.

Cities in North Carolina like Sawmills, Marion and Hamlet boast some of the lowest living costs in the state. Because cost of living impacts your finances long after you’ve purchased your home, the cheapest places to buy a house in North Carolina may not be the most affordable places to live.

Calculate Mortgage Rates

If you are buying a home in North Carolina, it is essential that you understand the financing options available to you. Mortgage rates vary by mortgage type, the buyer’s financial profile and lender.

To calculate your mortgage rate, lenders will take into account your income, credit score, requested loan amount and other pertinent factors. Shopping around and comparing prices is the most effective way to find the cheapest rates.

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SEE YOUR MORTGAGE OPTIONS

The interest rate that you pay on your mortgage will be determined by a number of factors, including your financial profile and chosen mortgage type.

A good credit score qualifies you for more mortgage options at lower interest rates. If you have poor credit, obtaining a loan may be challenging and expensive; those with low credit may receive a high interest rate on their mortgage, which can add up over time.

The following are the current mortgage interest rates in North Carolina offered for each type of loan:

Remember that mortgage rates may vary depending on your profile and market conditions at the time you apply for a loan.

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USE A MORTGAGE CALCULATOR

Before proceeding with the purchase of a home, it’s important to calculate your future mortgage payments. This is important in order to determine whether you can afford your projected monthly mortgage payments.

MoneyGeek's mortgage calculator breaks down your monthly mortgage payment into principal, interest, insurance and tax to help you differentiate between how much of your payment is going toward the original amount versus interest.

Additionally, if you qualify for both FHA and conventional loans, you can assess which one is best for you by using our FHA vs. conventional loan calculator. This tool allows you to calculate your average loan payment with each loan so that you can choose the best option for your needs.

Mortgage loans are typically repaid, with interest, over a period of several years. Taking the time to evaluate your options upfront can save you money in the long run.

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KNOW YOUR QUALIFICATIONS

Your credit and financial profile will determine the types of loans available to you and the possible interest rates. If your profile shows that you are a low-risk borrower, it is likely that you will have access to more mortgages and better rates.

Lenders generally evaluate your creditworthiness based on the following criteria:

  • Credit score: If you have a good credit score, lending institutions will view you as more likely to repay your loan on time. There will be less risk associated with lending you funds, allowing for reduced mortgage rates.
  • Income: One of the most important indicators that you are able to repay your loan is the amount of money you bring in each month. This shows that you have a stable flow of funds to make your payment.
  • Down payment: Most loans require that borrowers make a minimum down payment of 20%. However, making a higher down payment instills confidence in the lender that you’ll be able to repay your loan, further reducing your mortgage rates.

Prepare Down Payment Requirements

Down payment requirements vary by mortgage type. For instance, some loans, like FHA loans, require a low minimum down payment of 3.5%m while others require a down payment of 20%. In addition, if you qualify for a VA or USDA home loan, you may be eligible for a zero-down-payment option.

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DETERMINE DOWN PAYMENT REQUIREMENTS

When purchasing a home in North Carolina, the down payment is one of the largest expenses you should anticipate.

Your required down payment depends on the type of loan you obtain, but conventional loans typically require a 20% down payment. However, qualifying borrowers can obtain government-backed mortgages with no down payment.

Furthermore, if you are a veteran or active military personnel, you may be eligible for a VA home loan with no down payment. If you're purchasing a property in a rural region, the USDA also offers no-down-payment mortgage loans.

Remember that the down payment amount you make will impact the loan terms you receive. If you make a large down payment, you will reduce your monthly payments and possibly receive a lower interest rate.

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CALCULATE MORTGAGE INSURANCE

The majority of mortgage lenders will require that you purchase private mortgage insurance (PMI) if your down payment is less than 20%. The lender is protected by PMI in the event that you default on your mortgage.

The following are the most common loan types and their respective PMI requirements:

  • Conventional loans: If you make a down payment of less than 20%, you are required to obtain PMI.
  • FHA loans: Although you will not be obligated to obtain PMI for a low-down-payment FHA mortgage, you will be required to pay an upfront mortgage insurance premium (MIP).
  • VA loans: For the majority of VA loans, you won't need to worry about PMI.
  • USDA loans: PMI isn’t required for USDA loans, but a guarantee fee does apply.
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DOWN PAYMENT ASSISTANCE PROGRAMS

First-time homebuyers in North Carolina may be eligible for a down payment assistance program. These programs are immensely helpful because they help cover a substantial percentage of the fees associated with purchasing a home.

The following are some of the first-time homebuyer programs in North Carolina:

  • NC Home Advantage Mortgage: Both first-time and repeat homebuyers can get a loan of up to 5% of their initial mortgage through the NC Home Advantage Mortgage program. As part of the NC 1st Home Advantage Down Payment, qualified first-time homebuyers and veterans may receive up to an additional $8,000.
  • Community Partners Loan Pool: The Community Partners Loan Pool (CPLP) provides qualifying homebuyers with a second mortgage with no interest and a deferred closing date. It may be paired with an NC Home Advantage mortgage to obtain up to 20% of the purchase price (up to $30,000) or a USDA 502 mortgage to obtain up to 10% of the purchase price.

Get Pre-Approved for a Mortgage

Before searching for houses in North Carolina, it is recommended that you obtain pre-approval for a mortgage. This shows sellers that you’re a serious buyer and allows you to see the mortgage amount and rates available to you.

Remember that pre-approval and prequalification are different. Pre-approval for a mortgage loan signifies that the lender has committed to providing you with a particular amount of funds to buy a house. In contrast, prequalification simply indicates that you are eligible for a loan; this is less significant than a pre-approval and the lender has no obligation to fulfill it.

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GATHER NECESSARY DOCUMENTS

Before approaching a lender for a loan, you should organize the necessary documentation to streamline the application process and increase your chances of approval.

The majority of lenders will request your personal and financial documentation to verify your identity and credit history. Subsequently, they will evaluate your creditworthiness based on the given documentation.

Typically, you will be required to provide these documents:

  • Driver's license
  • Social Security card
  • Most recent pay stubs
  • Three years of tax returns with W-2s
  • Bank statements
  • Credit cards and debts list

Depending on your profile, certain lenders may want additional documentation.

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TIME YOUR PRE-APPROVAL

By timing your pre-approval appropriately, you can prevent wasting time and money, as well as negatively impacting your credit score. It can take ten days for a bank to process your pre-approval request, and after you’re approved your letter is only valid for 30 to 90 days.

Consequently, you should only apply for pre-approval if you are ready to purchase a home. Each time you apply, a lender completes a hard credit check. If your pre-approval expires, you will need to start fresh, so plan your schedule accordingly.

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RECEIVE PRE-APPROVAL LETTER

When you’re pre-approved for a loan, lending companies typically send you a letter of pre-approval. This document outlines the lender's willingness to fund your home purchase up to a specified limit. Keep in mind, however, that a letter of pre-approval does not guarantee you a loan. However, it demonstrates to sellers that you are a serious buyer who can secure financing.

Although it is feasible to obtain multiple pre-approvals from various lenders, it is not recommended. Before providing pre-approvals, loan companies frequently conduct rigorous credit checks that impact your credit rating.

Multiple pre-approval requests might damage your credit and result in higher mortgage rates when it comes time to finalize your mortgage.

Conduct a Home Inspection

Home inspections are an essential part of the homebuying process. This is important for identifying potential issues with your home. If you purchase a home without first having it inspected, you may have to deal with more expensive health and safety issues later on. In addition, some lenders may require a certified home inspection before approving a mortgage loan application.

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CONTACT A LICENSED INSPECTOR

MoneyGeek recommends that you seek the assistance of a qualified and licensed home inspector prior to purchasing your home. A home inspection can make you more confident in your home purchase or lead you to consider alternative options.

At a minimum, your home inspection should include the following areas:

  • Roof
  • Foundation
  • Heating and cooling systems
  • Electrical system
  • Plumbing system
  • Windows
  • Doors
  • Grounds
  • Attic and basement
  • Major appliances
  • Chimney

Minor concerns discovered during a home inspection can be used to negotiate your home’s purchase price. However, if structural damage is found, you may want to reconsider the purchase.

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FOLLOW NORTH CAROLINA-SPECIFIC INSPECTIONS

In North Carolina, home inspections are not mandatory, but inspectors are obliged to adhere to specified inspection and business practices.

We advise that you hire a qualified and licensed home inspector to guarantee that there are no life-threatening hazards or structural defects in the house.

The purpose of a home inspection is to guarantee that your new home is structurally and mechanically sound. Certain counties or cities may have their own inspection standards. Contact your real estate agent for information on the local inspection laws in your area.

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GO THROUGH APPRAISAL

Lenders will conduct a home appraisal on your selected residence in order to establish its market value. This ensures that the property is worth its purchase price to prevent the buyer from overborrowing.

Remember, if you don't pay your mortgage, the bank will repossess your house. This is their way of ensuring that they will recoup their money back if you sell the property.

During the appraisal process, expert appraisers will conduct a comprehensive analysis of the residence. They will evaluate the property's condition, look, size, location, facilities, number of bedrooms and other features. In order to gain a better grasp of the market, they will also examine the housing prices in the neighborhood.

Close Your Mortgage Loan

Following the completion of the home inspection and appraisal, the mortgage lender will now be able to make a loan offer. If you accept the terms outlined in the agreement, you can now initiate the closing process.

During this phase, it is possible that you will incur a range of costs. If you are experiencing trouble obtaining funds for your closing costs, there are programs in North Carolina that might assist you.

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SIGN ALL DOCUMENTS

During the closing process, you’ll be required to sign numerous documents. It’s important that you thoroughly review and understand these prior to signing them to avoid any unexpected costs later on.

After accepting the lender's offer, you must sign the following documents:

  • Final loan application: You’ll be required to sign your original loan application to verify that all of the information you provided is correct. If any of your financial information has changed, you should notify the lender.
  • Mortgage note: The mortgage note legally binds you to the loan. It includes the loan amount, interest rate, payment schedule and other pertinent details.
  • Property deed: The deed contains information about the property's ownership and technical specifications.
  • Closing Disclosure: The terms of your loans are outlined in this document. The lender must provide you with a copy of this disclosure three business days prior to the mortgage closing.
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PAY CLOSING COSTS

In North Carolina, average closing costs range from 2% to 5% of the purchase price. These considerations may vary according to your area, lender and other variables.

The following are the closing costs you will incur as a homebuyer:

  • Origination fee: Lenders may impose origination fees, which are typically a small percentage of the overall loan amount.
  • Escrow: The lender can require that you put two months' worth of property tax and insurance payments into an escrow account.
  • Title search fee: You may be required to hire a title company to verify the ownership and legal standing of the property you're purchasing.
  • Lender fees: The lender may bill you for expenses incurred throughout the loan application process, such as an appraisal fee.
  • Third-party fees: You'll be required to pay a variety of third-party costs, such as inspection costs, legal costs, homeowners association dues and more.
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COMPLETE YOUR HOME PURCHASE

If you're like the majority of individuals, purchasing your first home is an important milestone in your life. Following a step-by-step procedure can help you have a successful homeownership experience, despite the complexity of the process.

The first step is locating the best place to buy a house in North Carolina. Next, you must estimate your mortgage payments and down payment. Now, you must obtain a pre-approval letter from a lender and search for your ideal home. After selecting your desired property, you must do a home inspection and close your mortgage.

Once your funds have been released, it’s important that you take note of your first payment due date. To avoid paying late fees for missed payments, consider setting up automatic payments or payment reminders.

North Carolina Homebuying Details

It is important to keep in mind that North Carolina has lower average home prices than the U.S. as a whole, along with much lower than average living expenses. You can lower your cost of living by purchasing a home in a rural area, but you should recognize that you may be sacrificing access to amenities.

Moreover, homebuyers in the state have access to both conventional and government-backed mortgages. In addition, North Carolina provides a variety of down payment assistance programs for first-time and low-income homebuyers. Applicants who qualify can get a grant or second mortgage to help cover closing costs or down payments.

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The NC Home Advantage Mortgage program offers loans of up to 5% of the initial mortgage to both first-time and recurrent homebuyers. Approved first-time homebuyers and ex-servicemen may receive up to an additional $8,000 as part of the NC 1st Home Advantage Down Payment.

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The Community Partners Loan Pool (CPLP) offers eligible homebuyers an interest-free second mortgage with a deferred closing date. To qualify, you must have a credit score of at least 640 and your household's income cannot surpass 80% of the area's average income. Additionally, applicants must complete a homebuyer education course and at least two hours of home counseling.

Frequently Asked Questions About Buying a Home in North Carolina

Buying a home is a significant financial and personal investment. MoneyGeek answered some frequently asked questions about buying a house in North Carolina to assist you on your path to homeownership.

What are the most important questions to ask when buying a house in North Carolina?
Is buying a house in North Carolina a good idea?
Is it wise to buy a house in North Carolina in 2023?
How much income do I need to buy a house in North Carolina?
How much is property tax in North Carolina?
Which North Carolina city is the cheapest to buy a home?
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